Old Hampton Company is preparing adjusting entries at December 31. An analysis reveals the following:
1. During December Old Hampton Company sold 3000 units of a product that carries a 60-day warranty. The sales for this product totaled $100000. The company expects 4% of the units to need repair under the warranty and it estimates that the average repair cost per unit will be $15.
2. The company has been sued by a disgruntled employee. Legal counsel believes that it is reasonably possible that the company will have to pay $200000 in damages.
3. The company has been named as one of several defendants in a $400000 damage suit. Legal counsel believes it is unlikely that the company will have to pay any damages.
4. Employees earn vacation pay at a rate of 1 day per month. During December ten employees qualify for vacation pay. Their average daily wage is $90 per employee.
Instructions
Prepare adjusting entries if required for each of the four items.

Question

Quizplus · Accepted Answer

The Answer of Old Hampton Company is preparing adjusting entries at December 31. An analysis reveals the following:
1. During December Old Hampton Company sold 3000 units of a product that carries a 60-day warranty. The sales for this product totaled $100000. The company expects 4% of the units to need repair under the warranty and it estimates that the average repair cost per unit will be $15.
2. The company has been sued by a disgruntled employee. Legal counsel believes that it is reasonably possible that the company will have to pay $200000 in damages.
3. The company has been named as one of several defendants in a $400000 damage suit. Legal counsel believes it is unlikely that the company will have to pay any damages.
4. Employees earn vacation pay at a rate of 1 day per month. During December ten employees qualify for vacation pay. Their average daily wage is $90 per employee.
Instructions
Prepare adjusting entries if required for each of the four items.

Old Hampton Company Is Preparing Adjusting Entries at December 31